A non-probate transfer is a method of transferring or distributing assets in an estate to one or more beneficiaries in a manner that avoids probate. Any portion of a decedentís estate that passes to heirs of the estate through the formal court process known as
probate is considered to be part of the probate estate. Any asset in a decedentís estate that passes to beneficiaries outside of probate is considered to be a non-probate asset.
Examples of Non-Probate Transfers Used in Estate Planning
The following are examples of non-probate transfers commonly used in estate planning:1. Passing property to beneficiaries through a
living trust.2. Leaving funds to a beneficiary named on a pay on death account or
transfer on death account.3. Leaving funds to a beneficiary named on a
life insurance policy.4. Leaving funds to a beneficiary named on an IRA, 401k or other retirement account. See
5. Holding title to property as
joint tenants or tenancy by the entirety.
6. Leaving motor vehicles to a transfer on death beneficiary.
7. Gifting assets to heirs during your lifetime so the assets do not pass as part of your estate.
8. Executing and recording a
transfer on death deed naming a beneficiary to inherit your real estate.
Forms to Include in Your Estate Plan
In addition to completing paperwork to pass certain assets outside of probate, you can enhance your estate plan by completing several additional forms. These forms may make it easier for your executor or trustee to settle your estate. For a list of free forms available on Pennyborn.com, see free estate planning forms.
Using Non-Probate Transfers in Estate Plan
When making an estate plan, non-probate transfers could be important if you are trying to save money, protect your familyís privacy or ensure your heirs receive their
inheritance quickly, especially if it is needed for daily living expenses. Many people are unaware of how much they can accomplish simply by taking a few steps to transfer their estate through non-probate transfers rather than subjecting their estate to probate.
If given the choice, most people would like to avoid going through the process of probate when a loved one dies. Probate has a lot of disadvantages. First, it means the assets in your estate could be tied up for months or even years while your heirs wait for various steps in the probate process to be completed. During this time, a judge may have a say in what happens to your property. Many Americans feel government has already become too involved in their lives. Therefore, knowing how to distribute your estate through non-probate transfers may be important if you want to avoid subjecting your affairs to the legal process known as probate.Another reason non-probate transfers are important in
estate planning is privacy. The filings that must be submitted during probate can threaten your familyís privacy and expose information you may not want strangers to have. Unfortunately, information required for court filings may later appear on the Internet. Whether you have concerns about keeping your financial matters private or are concerned about preventing identity theft, probate is probably something you want to avoid. Non-probate transfers provide an alternative method of distributing your estate in a way that preserves your privacy to a much greater extent.If you leave assets that must go through probate, one of your survivors will probably have to hire an attorney and complete a lot of paperwork to administer your estate according to probate requirements. Even if people ultimately decide the probate process was not as bad as they anticipated, the mere thought of having to go to court or even be involved with a court is intimidating to many people. When you find out how easy it is to arrange for your estate to pass through non-probate transfers, you may decide this is something you want to do to make things easier for those you leave behind.
Free Estate Planning Methods
A common reason people fail to make an estate plan is they believe they cannot afford it. In fact, several of the estate planning methods discussed on this page will not only help you avoid probate, they are absolutely free. For example, you can complete the following steps in making an estate plan at no cost to you:1. Complete forms to name a pay on death account beneficiary or transfer on death beneficiary on all your bank accounts and stock brokerage accounts.2. Complete forms to name beneficiaries on your pension, 401K plan, IRAs, and other retirement accounts.3. Complete forms to name beneficiaries on your life insurance policies and any annuities you own.4. Complete forms at your local Department of Motor Vehicles to name a transfer on death beneficiary or TOD beneficiary to inherit any cars, trucks or trailers you own. The procedures for naming a transfer on death beneficiary on a vehicle are different from state to state. Visit the website for the Department of Motor Vehicles in your state to locate the forms and instructions for naming a TOD beneficiary on your vehicles.5. Use your annual gift tax exclusion amount to pass assets to your desired beneficiaries through a simple gifting strategy rather than leaving them as part of your estate.The estate planning methods outlined above are examples of non-probate transfers you can complete on your own without paying for a particular estate planning service.
Note: Using life insurance, pay on death accounts, and retirement accounts to pass your estate to beneficiaries outside of probate only works if you:
a. complete all required forms to name a beneficiary on each policy or account; and
b. name a beneficiary other than your estate. Of course, if you name your estate as the beneficiary of these accounts or policies, the property will pass through probate.